One of the cool things about the new Motley Fool CAPS stock-picking site is the ability to see what bulls and bears think of any given stock at any given time. Over the past two weeks, this column has taken a bite out of Apple Computer (NASDAQ:AAPL) and played hardball with Microsoft (NASDAQ:MSFT).
This week, we're taking a closer look at Sirius Satellite Radio (NASDAQ:SIRI). As a stock with heavy retail investor ownership, Sirius is always a discussion-board hotbed, and rare is the day when it doesn't wind up on Nasdaq's most actively traded list.
Sirius-ly good
The case for Sirius can be pretty compelling if you stop at the top line. Growth has been phenomenal at the company, landing more subscribers than its larger rival XM (NASDAQ:XMSR) for three consecutive quarters. The company was able to lure CBS (NYSE:CBS) programming guru Mel Karmazin to head the company and, love him or hate him, Howard Stern is an audience magnet.
Let's see what some of your fellow investors had to say about Sirius on CAPS:
Eldonabe -- 8/27/06
The results of the third quarter will once again prove that Sirius is outpacing XM in new subscriber additions, and the heat will really be turned up for XM.
With the new totally wireless handheld device, the Holiday quarter will further reduce the subscriber gap between XM and Sirius.
Today the pricing link between the two companies is driven by XM (price and industry movement). As the rest of 2006 unfolds, Sirius will dictate the group, and all the good news reported in the last nine months will finally start moving this stock in the upward direction.
Themaeth -- 7/10/06
Mel Karmizan has been keeping his promises of various tasks the company wants to accomplish. Howard Stern started earlier this year, yet subscribers are still flowing in quite rapidly. Let me mention that Sirius subscribers are coming in much faster than XM subscribers.
But this is the most important factor: Mel believes they will be cash flow positive on Sirius' fourth quarter this year with 6.2 million subscribers. XM said that it will be cash flow positive for the same period but with 8.5 million subscribers. That means that Sirius is more cost-efficient and seems to know how to handle its business. Early next year, Sirius will perhaps be trading double today's price.
Scratchingbuy -- 9/15/06
Satellite radio is a duopoly with a working subscription model. Buy Sirius and XM to own the industry. Ignore the hype and critics.
Xlen1 -- 9/15/06
Mel K understands entertainment. Fastest adoption rate for any new technology. Great variety in programming with the two most popular sports in America: NFL & NASCAR (coming '07). Stern! Too many commercials on terrestrial radio! New models launched for holiday season.
JimFromPhilly -- 9/28/06
SatRad will eventually catch on with the public.... It's sooo much better than terrestrial radio and with installation in new cars it'll happen sooner than later. Sirius seems to have a better management team in place than XM. Never bet against Mel K.
Sirius-ly bad
Yes, Sirius is impressive -- until you begin to weigh the company's $5.5 billion market cap and its propensity for red-inked quarters. Despite the heady subscriber growth and assurances that the company is on the cusp of generating positive operating cash flow, jaded investors want to see it before they believe it.
Let's see what some of your more bearish fellow investors had to say about Sirius on CAPS:
WillSurfForFood -- 9/20/06
I have heard that satellite radio is nice to have, however I have never been that interested. The last thing I want is another monthly bill. I like to listen to NPR to and from work which I get for free. I can see satellite radio being nice to have for longer drives but then there are still other alternatives like traditional radio or using the iPod. I'm not convinced that satellite radio will ever take off as much as some would like to believe or that the companies providing the service will ever make that much money. In the mean time they are sure losing money fast.
Ricoy5 -- 9/27/06
After doing a case study on Sirius for a Finance class, we found that its revenue did not match its stated customer base. It insists on reporting the "trial period" customers that are tied in with new auto sales. When these plans expire, it's left with an estimated 40% of their touted customer base.
Pencils2 -- 9/6/06
Do people even note the fact that Sirius borrowed $430 million last year? And that revenue quadrupled and they lost MORE money? And that they are quickly racking up debt? Sirius has pathetic, terrible margins, can't for the life of them make a profitable product, and cannot manage money. To be a good investment in an up-and-coming industry (possibly), it helps to know how to run a business and have a profitable product. Sirius is stuck with borrowing millions of dollars, because the business can't produce squat. Ignore the hype about satellite radio and look at the fundamentals for a second. Whoa! Did you just realize that quite possibly Sirius might not be around in five years? Even with rapidly increasing revenue Sirius can't even raise net income, they lose more. Pathetic, disgraceful company that shouldn't be public.
jjlandry6a -- 9/13/06
I was burned on Sirius and do not hold out much hope. Mel and Stern have not turned around the Titanic of radio companies. They are paying for the NASCAR broadcasts that are overpriced and not a big draw. With Best Buy (NYSE:BBY) hard-selling Sirius at their stores, it smells like the last gasp of a dying company, revenue at any cost.
UnkSandPoint -- 9/20/06
Sirius is in some serious trouble. They seem to have no clear plan to become profitable. In order to make money, they need to lower subscriber acquisition costs but can't seem to do that. Early adopters are growing bored with the technology and with half of their lineup being tied to commercial-free music, you have to wonder how long that will last. Bottom line: No way I touch this stock until they execute.
I've got a Sirius new attitude
I'm bullish on satellite radio. I have recommended XM to Rule Breakers newsletter subscribers. And even though I turned bearish on Sirius when its market cap peaked above $10 billion, I can appreciate Sirius at this price point.
Earlier this month, the company stuck to its long-term target of generating $1 billion in cash flow before capital expenditures on $3 billion in revenue. It sounds lofty, but Sirius has actually been pretty conservative in pointing to the fences in the past.
Unfortunately, a lot can happen between now and 2010. Disruptive technologies often get disrupted. Satellite radio has proven that it can grow despite the runaway success of eardrum-hungry iPods, but will it hold up as well against the next generation of portable media players and the arrival of HD radio?
The future will be an exciting thing to watch unfold, no matter where you stand on the Sirius debate. Isn't it nice to know that you can take a dip in the Community Pool and see things from both sides? Feel free to join the fray and share some thoughts of your own.
Motley Fool CAPS is a new community-driven experience where individual investors pool their knowledge to seek out superior stock ideas. Are you up for the challenge? Go ahead and give it a shot .
Best Buy is a Stock Advisor recommendation and Microsoft is an Inside Value newsletter selection. XM Satellite Radio is Rule Breakers stock pick. Check any of these newsletters for more information on a free 30-day trial subscription.
Longtime Fool contributor Rick Munarriz learned to swim at an early age, so he doesn't fear diving into the community pool. He does not own shares in any of the companies in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy .
